Tag: coal

End of coal generation at Drax Power Station

Coal picker, Drax Power Station, 2016

Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)
RNS Number : 2747E

Following a comprehensive review of operations and discussions with National Grid, Ofgem and the UK Government, the Board of Drax has determined to end commercial coal generation at Drax Power Station in 2021 – ahead of the UK’s 2025 deadline.

Commercial coal generation is expected to end in March 2021, with formal closure of the coal units in September 2022 at the end of existing Capacity Market obligations.

Will Gardiner, Drax Group CEO, said:

“Ending the use of coal at Drax is a landmark in our continued efforts to transform the business and become a world-leading carbon negative company by 2030. Drax’s move away from coal began some years ago and I’m proud to say we’re going to finish the job well ahead of the Government’s 2025 deadline.

“By using sustainable biomass we have not only continued generating the secure power millions of homes and businesses rely on, we have also played a significant role in enabling the UK’s power system to decarbonise faster than any other in the world.

“Having pioneered ground-breaking biomass technology, we’re now planning to go further by using bioenergy with carbon capture and storage (BECCS) to achieve our ambition of being carbon negative by 2030, making an even greater contribution to global efforts to tackle the climate crisis.

“Stopping using coal is the right decision for our business, our communities and the environment, but it will have an impact on some of our employees, which will be difficult for them and their families.

“In making the decision to stop using coal and to decarbonise the economy, it’s vital that the impact on people across the North is recognised and steps are taken to ensure that people have the skills needed for the new jobs of the future.”

Coal in front of biomass storage domes at Drax Power Station, 2016

Coal in front of biomass storage domes at Drax Power Station, 2016

Drax will shortly commence a consultation process with employees and trade unions with a view to ending coal operations. Under these proposals, commercial generation from coal will end in March 2021 but the two coal units will remain available to meet Capacity Market obligations until September 2022.

The closure of the two coal units is expected to involve one-off closure costs in the region of £25-35 million in the period to closure and to result in a reduction in operating costs at Drax Power Station of £25-35 million per year once complete. Drax also expects a reduction in jobs of between 200 and 230 from April 2021.

The carrying value of the fixed assets affected by closure was £240 million, in addition to £103 million of inventory at 31 December 2019, which Drax intends to use in the period up to 31 March 2021. The Group expects to treat all closure costs and any asset obsolescence charges as exceptional items in the Group’s financial statements. A further update on these items will be provided in the Group’s interim financial statements for the first half of 2020.

As part of the proposed coal closure programme the Group is implementing a broader review of operations at Drax Power Station. This review aims to support a safe, efficient and lower cost operating model which, alongside a reduction in biomass cost, positions Drax for long-term biomass generation following the end of the current renewable support mechanisms in March 2027.

While previously being an integral part of the Drax Power Station site and offering flexibility to the Group’s trading and operational performance, the long-term economics of coal generation remain challenging and in 2019 represented only three percent of the Group’s electricity production. In January 2020, Drax did not take a Capacity Market agreement for the period beyond September 2022 given the low clearing price.

Enquiries

Drax Investor Relations:
Mark Strafford
+44 (0) 7730 763 949

Media

Drax External Communications:
Ali Lewis
+44 (0) 7712 670 888

 

Website: www.drax.com/northamerica

END

Capacity Market agreements for existing assets and review of coal generation

Drax's Kendoon Power Station, Galloway Hydro Scheme, Scotland

RNS Number : 6536B

T-3 Auction Provisional Results

Drax confirms that it has provisionally secured agreements to provide a total of 2,562MW of capacity (de-rated 2,333MW) from its existing gas, pumped storage and hydro assets(1). The agreements are for the delivery period October 2022 to September 2023, at a price of £6.44/kW(2) and are worth £15 million in that period. These are in addition to existing agreements which extend to September 2022.

Drax did not accept agreements for its two coal units(3) at Drax Power Station or the small Combined Cycle Gas Turbine (CCGT) at Blackburn Mill(4) and will now assess options for these assets, alongside discussions with National Grid, Ofgem and the UK Government.

A new-build CCGT at Damhead Creek and four new-build Open Cycle Gas Turbine projects participated in the auction but exited above the clearing price and did not accept agreements.

T-4 Auction

Drax has prequalified its existing assets(5) and options for the development of new gas generation to participate in the T-4 auction, which takes place in March 2020. The auction covers the delivery period from October 2023.

CCGTs at Drax Power Station

Following confirmation that a Judicial Review will now proceed against the Government, regarding the decision to grant planning approval for new CCGTs at Drax Power Station, Drax does not intend to take a Capacity Market agreement in the forthcoming T-4 auction. This project will not participate in future Capacity Market auctions until the outcome of the Judicial Review is known.

Enquiries:

Drax Investor Relations
Mark Strafford
+44 (0) 7730 763 949

Media:

Drax External Communications
Matt Willey
+44 (0) 0771 137 6087

Photo caption: Drax’s Kendoon Power Station, Galloway Hydro Scheme, Scotland

Website: www.drax.com/northamerica

What will happen to the carbon price after 2020?

Great Britain’s electricity is cleaner than ever. As wind, solar, biomass and hydro continue to make up more and more of our energy mix, the power system edges ever closer to being entirely decarbonised. The GB power system has leapt up the big economies’ low carbon league table from 20th in 2012 to seventh in 2016.

But this shift to lower-carbon power isn’t owed only to growing renewable electricity capacity. A fall in gas prices has helped and importantly, government policy has ensured coal power generation has become increasingly uneconomical vs electricity produced with gas (gas and coal compete for contracts to supply power to the National Grid).

Introduced in 2013, Great Britain’s Carbon Price Floor sets the minimum price on carbon emissions. A stricter policy than the EU’s volatile EU Emissions Trading System (EU ETS) which puts a much lower price on carbon dioxide (CO2) emissions, the Carbon Price Support as the British policy is also known tops up the EU ETS. Together, they have had a significant impact. According to Aurora Energy Research, the Carbon Price Floor is a major factor in coal generation emissions falling.

In Great Britain, the Carbon Price Floor (CPF) is currently capped at £18 per tonne of CO2 and the EU ETS sits at around £5 t/CO2 – meaning power generators and heavy industry pay around £23 t/CO2 altogether. When initially formulated by the coalition government in 2010, it was intended the CPF would reach £30 per tonne by 2020 and £70 per tonne by 2030. However, the EU ETS has since fallen therefore the UK government chose to cap the carbon price support at £18 per tonne until 2020.

Now, as we reach the end of the decade, questions remain as to what will happen to this crucial mechanism post-2020. Will the government price coal off the system once and for all or will the fossil fuel make an unlikely comeback?

Four visions of carbon pricing’s future

In its research, Aurora has identified four potential future scenarios for the UK’s carbon pricing strategy.

Status Quo: If the UK chooses to continue supporting the phase-out of coal and promotes low-carbon investment, the Carbon Price Floor will steadily increase post-2020, reaching an estimated £52 per tonne by 2040. In this scenario the UK’s carbon pricing structure remains about £18 per tonne higher than the EU ETS which is currently around £5 per tonne.

Catch-up: In the post-Brexit landscape (whatever it may look like) the UK may choose to seek parity with the EU over decarbonisation. In this scenario, the total UK carbon price remains flat with EU ETS, which rises until convergence. In this scenario the UK and EU’s price per tonne of carbon reaches £35 by 2040.

Low Priced Carbon: In the event that the UK government removes the carbon price from 2021 and the EU ETS never recovers beyond its 2017 level, the short-term effects could be a drop in the price of coal power and cheaper energy bills. CO2 emissions increase in the UK as demand for power rises in the late 2020s and beyond (as recently witnessed in the Netherlands where coal generation has increased, in part, due to a low EU ETS). The expected price per tonne of carbon could be as low as £6 by 2040 and investment in lower carbon and renewable forms of power generation stalls.

High Priced Carbon: In order to meet the UK’s fourth and fifth carbon budgets set by the Committee on Climate Change, this scenario sees the electricity system decarbonise more quickly, with coal removed as an energy source. The carbon price rises dramatically over the next two decades to hit £153 per tonne by 2040.

Stopping the coal comeback

Of these four scenarios, the steadily increasing prices of the Status Quo scenario could see the UK meet its power sector target within the fourth carbon budget of 100 g CO2-eq/kWh  – achieving a 51% reduction from 1990 emission levels by 2030. But Aurora found that keeping things as they are could see a radical swing the other way, some years earlier in its scenario: coal could make a comeback in the early 2020s.

In July this year, coal accounted for just 2% of electricity generation in Great Britain and in 2016 as a whole it accounted for 9%, producing the lowest amount of electricity since the start of World War II. Without solid growth of the Carbon Price Floor it could become a much more competitive fuel. This potential is further increased by a predicted rise in natural gas prices post-2020, when the current surplus of liquefied natural gas (LNG) is set to end.

If the government chooses not to set tough prices on carbon emissions, Aurora predicts that on average coal will account for 9% of electricity generation between 2021 and 2025 – a change in the declining coal power trend seen in recent years. A Low Carbon Price future would see coal grow to almost 12% of the total electricity generation mix during the same period.

By contrast, in the High Carbon Price scenario, coal is almost completely driven out of the energy system, accounting for an estimated 2% of electricity generation between 2021 and 2025.

Signalling to the future

What is crucial for British power generators at this stage is clarity beyond 2020, when the £18 per tonne cap ends. This can allow the industry to react to future carbon pricing and prepare for whatever future scenario the government is most likely to adopt.

If the government chooses to continue decarbonising the energy system in a significant way – as it should do – coal facilities can be converted to renewable or lower-carbon units, such as biomass or gas. New interconnectors, renewable sources, storage facilities and demand-side response will also need to be installed at a greater capacity to meet the energy system’s demands.

As the amount of low carbon generation continues to grow, it will increasingly be the marginal generator. This means that power stations such as Drax’s biomass units, which run with an 87% lower carbon footprint compared to coal across their entire supply chain, could be used to meet the last megawatt hour (MWh) of demand – and this would see the carbon price having a diminishing impact on the wholesale price of power.

As has already been shown, the Carbon Price Floor is one of the most effective ways to reduce Great Britain’s electricity emissions. But to continue this impressive progress, the government needs to use it appropriately to set a path towards a decarbonised future.

In October, Drax joined British energy company SSE, climate NGO Sandbag and others to write to Chancellor Philip Hammond, calling on him to back the Carbon Price Floor beyond 2020 and in doing so, provide certainty for businesses investing in lower carbon and renewable capacity. Read the letter here

How lasers reduce emissions

Drax laser

Of the air that makes up our atmosphere, the most abundant elements are nitrogen and oxygen. In isolation, these elements are harmless. But when exposed to extremely high temperatures, such as in a power station boiler or in nature such as in lightning strikes, they cling together to form NOx.

NOx is a collective term for waste nitrogen oxide products – specifically nitric oxide (NO) and nitrogen dioxide (NO2) – and when released into the atmosphere, they can cause problems like smog and acid rain.

At a power station, where fuel is combusted to generate electricity, some NOx is inevitable as air is used in boilers to generate heat. But it is possible to reduce how much is formed and emitted. At Drax Power Station, a system installed by Siemens is doing just that.

It begins with a look into swirling clouds of fire.

Not your average fireplace

“Getting rid of NOx is, at heart, a problem of getting combustion temperatures to a point where they are hot enough to burn fuel effectively. Too hot and the combustion will form excess amounts of NOx gases. Too cool and it won’t combust efficiently,” says Julian Groganz, a Process Control Engineer who helped install the SPPA-P3000 combustion optimisation system at Drax. “Combustion temperatures are the result of the given ratio of fuel and air in each spot of the furnace. This is our starting point for optimisation.”

An industrial boiler works in a very different way to your average fireplace. In Drax’s boilers, the fuel, be it compressed wood pellets or coal, is ground up into a fine powder before it enters the furnace. This powder has the properties of a gas and is combusted in the boilers.

“The space inside the boiler is filled with swirling clouds of burning fuel dust,” says Groganz. Ensuring uniform combustion at appropriate temperatures within this burning chamber – a necessary step for limiting NOx emissions – becomes rather difficult.

Heat up the cold spots, cool down the hotspots

If you’re looking to balance the heat inside a boiler you need to understand where to intervene.

The SPPA-P3000 system does this by beaming an array of lasers across the inside of the boiler. “Lasers are used because different gases absorb light at different wavelengths,” explains Groganz. By collecting and analysing the data from either end of the lasers – specifically, which wavelengths have been absorbed during each beam’s journey across the boiler – it’s possible to identify areas within it burning fuel at different rates and potentially producing NOx emissions.

For example, some areas may be full of lots of unburnt particles, meaning there is a lack of air causing cold spots in the furnace. Other areas may be burning too hot, forcing together nitrogen and oxygen molecules into NOx molecules. The lasers detect these imbalances and give the system a clear understanding of what’s happening inside. But knowing this is only half the battle.

A breath of fresher air

“The next job is optimising the rate of burning within the boiler so fuel can be burnt more efficiently,” explains Groganz. This is achieved by selectively pumping air into the combustion process to areas where the combustion is too poor, or limiting air in areas which is too rich.

“If you limit the air being fed into air-rich, overheated areas, temperatures come down, which reduces the production of NOx gases,” says Groganz. “If you add air into air-poor, cooler areas, temperatures go up, burning the remaining particles of fuel more efficiently.”

Drax Laser 2

It’s a two-for-one deal: not only does balancing temperatures inside the boiler limit the production of NOx gases, but also improves the overall efficiency of the boiler, bringing costs down across the board. It even helps limit damage to the materials on the inside the boiler itself.

Thanks to this system, and thanks to its increased use of sustainable biomass (which naturally produces less NOx than coal), Drax has cut NOx emissions by 53% since the solution was installed. More than that, it is the first biomass power station to install a system of this sophistication at such scale. This means it is not just a feat of technical and engineering innovation, but one paving the way to a cleaner, more efficient future.